THE combination of falling milk output in major producing countries and adverse weather sent the international butter price to a record high this year, according to the UN Food and Agricultural Organisation. Wholesale UK butter prices are up by a staggering 108 per cent year on year.
Ironically, the current shortage was driven by a long period of low dairy prices caused by favourable weather and the EU’s move to liberalise its dairy market in 2015.
Prices more than halved between 2014 and 2015, sending many dairy farmers out of business.
The demand for butter, however, continues to rise.
Recent studies have questioned the link between butter and heart disease and consumers have responded by swapping butter for margarine, which has suffered from bad publicity over its potential health effects.
In the UK, butter consumption has also benefited from the surge in home baking, thanks to television shows such as The Great British Bake-Off.
The demand for butter has diminished global stocks.
China is now back in the market for buying butter after a slow-down in demand in 2015.
In the UK, butter production has suffered because of the poor condition of dairy herds in the wake of last year’s overproduction crisis.
Many farmers couldn’t afford to supplement feed last summer.
Grass energy levels were also below average for most of 2016, so herds entered winter in worse condition.
This had an impact on milk fat levels.
Brexit was another factor.
The Brexit vote sent the value of sterling plummeting, making British butter more competitive and pushing exports up 58 per cent year on year. Meanwhile, bad weather in Australia and New Zealand has caused their butter production to fall and seen prices soar this.
Supermarket price wars have also contributed to butter shortages as punishingly low milk prices forced many dairy farmers out of business.
The supermarkets also refused to put up butter prices despite high wholesale costs, so some manufacturers decided to export instead. Retail prices for butter have risen by nearly 10 per cent over the last year, but there’s been an increase of more than 100 per cent in wholesale prices.
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